The actual results of mergers and acquisitions don’t always live up to expectations.
M&A growth strategies promise a multitude of strategic opportunities; from rapid growth, to elimination of competition, to access to new markets. And many organizations are currently, or have, embarked on merger and acquisition growth strategies to varying effect.
When asked about the primary causes of these mixed results, most leaders cite a misalignment between the two organizations’ cultures. This friction can wreak havoc as the members of different groups assimilate to drive the performance gains that M&A strategies forecast.
Nowhere do M&A growth strategies seem as prevalent lately as within the tech industry. Major transactions seem to hit the headlines on a weekly basis, with no end in sight. Amazon’s recent acquisition of Whole Foods for $13.7 billion is just one example.
But the titans of industry are not the only companies engaging in these types of deals. Companies of all shapes and sizes are actively engaged in M&A growth strategies to help position themselves to compete. And organizations of all sizes must be mindful of how company culture plays a role in M&A success.
The Role of Company Culture in Mergers and Acquisitions
Typically, these activities are conducted with a focus on the external. How are we going to gain access to new opportunities? How will this position us better to gain market share? How will this afford us economies of scale to keep ahead of our competitors?
What happens once the deal is complete is quite different, though. People tend to take a laser focus on the internal. How do we sort through multiples payroll systems and integrate our HRIS? Which sales compensation model will we use and how will we ensure that our operations can integrate as quickly as possible?
The risk here is twofold. First, if the transaction was initiated for externally focused reasons, becoming hyper-focused on internal integration can distract people from why the deal happened in the first place. Second, and perhaps more problematic, is that the promises of financial gain can be seductive, leading the organization to find data and examples to support the notion that the organizations are ideally suited to integrate, rather than looking at data objectively.
It’s not uncommon to hear executives talk about how the cultures of the organizations are well-aligned, and how this will facilitate an easier integration.
We’ve seen it play out time and time again as leaders convince themselves that the integration is a marriage made in heaven when, in fact, they have no real understanding or data with which to base that claim. With many millions (or billions) of dollars on the line, it seems ludicrous that companies would roll the dice with something so critical.
Some organizations, however, have a keen understanding of the effect that the integration of cultures has on the wild success (or colossal failure) of an integration effort.
Take Saba Software, for example, who recently acquired HR tech company Halogen Software. “The new, combined organization is now one of the largest independent talent management companies in the world,” according to the press release.
Beyond the headlines, how do mergers and acquisitions of this size become successful? I spoke with Debbie Shotwell, Saba’s Chief People Officer, to understand how they will make this acquisition successful.
A Culture First Approach to M&A
Ms. Shotwell may be new to her role at Saba, having joined the firm less than six months ago, but she isn’t new to M&A transactions and integrations. In fact, she’s lived through over 35 throughout her career, including Oracle’s acquisition of PeopleSoft in 2004.
“Good planning, communication, and being as honest and open with people as possible goes a long way in M&A integrations — these things are always important to people,” Debbie shared.
Now, Debbie is leading the complex efforts of integrating the Saba and Halogen HR systems and processes to drive the behavior of the new organization. This is no easy task, to say the least.
Debbie and her team are wading into the deep end of the integration pool. But they are quite intentional about collaborating with their Halogen counterparts to find a “best-of-both” solution for the integrated organization.
“Both companies share the same customer-centric culture and they are both very focused on customer success,” Shotwell describes. Though, despite their common goals, she also acknowledges that effectively integrating these companies in a way that drives financial performance quickly is no easy feat.
The risk in this situation is that both organizations define customer success differently and how they deliver success looks so different that it can create frustration or anxiety as employees struggle to figure out what the new “right” looks like across the new organization.
Guiding a successful integration through this tricky transition takes intention. Debbie shared with me the key components of her team’s approach to navigating this opportunity.
Take the Time to Really Understand the Cultures of Each Organization:
In all of the excitement of target identification and selection, it can be easy to grab onto the obvious similarities of the two organizations and tout how aligned the two workplace cultures are. Doing this is easy but it’s not enough.
For example, two companies may both value developing employees, but how each company actualizes this in the day-to-day may look totally different. One organization may rely on sending employees to outside training and development opportunities while the other has found success by leveraging internal, on-the-job development and job rotations. Neither is wrong per se, but they are two fundamentally different approaches.
You must take the time to dig deep into what “right looks like” in each organization to ensure you don’t jump on the culture bandwagon and drive yourself into a ditch.
Being Intentional: Take the Time to Do It Right:
“Most leaders want to complete the integration process as quickly as possible in order to reap the financial benefits of the transaction,” Shotwell says. “This can come back to bite them. I believe in taking a step back, planning, and taking your time with your integration strategy.”
Being extremely thoughtful about your integration strategy allows your organization to more effectively manage the human side of the transition process and mitigate many of the risks inherent with using the “ready-fire-aim” approach.
Leverage Transparency to Keep People Engaged:
Integrations are extremely complex. Imagine changing all four tires on your car while driving at top speed on the highway. Oh, and it’s snowing.
Things change again and again and leaders often just don’t have answers to everyone’s questions. Finding ways to engage people throughout the process, to keep them informed the best you can, and to solicit their input helps to create transparency. “Integrations are about the people,” Shotwell says. “Both Saba and Halogen share a common commitment to investing in the long-term success, growth, and development of our people; something that must be acknowledged and honored as we integrate.”
Bring People Together for Purposeful Dialogue:
In the spirit of keeping the lines of communication open, it’s important to bring people along with you throughout the integration process. Creating opportunities for people to come together to look each other in the eye, ask questions, and discuss the realities of the integration in a purposeful way can help people express their anxieties. Dialogue also connects employees with a larger support system as they work through the nebulous days of integration.
Celebrate Successes and Failures:
No integration is ever perfect. There will be successes and there will be failures. Trying to shape the narrative that everything is perfect doesn’t fool anyone. In fact, ignoring the challenges can create a dynamic where employees feel that they cannot share their struggles or failures with leaders. This can have long lasting, negative repercussions down the road when those things grow ten heads and come back to bite you.
Finding ways for people share both their successes and failures allows for the organization to learn from each situation and it creates a dynamic where continuous learning and improvement are valued.
Care About Learning and Development:
One of the primary sources of anxiety for employees during an integration—once they know whether or not they have jobs—is if they will know how to succeed in the new organization. Making an effort to help employees understand how their role and responsibilities will change and providing support with their development can help reduce the stress associated with a transition like this.
Ensure Leaders Are Prepared to Coach Their Teams:
“Leaders are the catalyst that helps everyone else be successful,” explains Shotwell. “Helping leaders understand themselves and each other helps them support their people and teams on an ongoing basis so they can feel valued, accepted, fulfilled, connected to what we’re doing.”
One mistake executives can make is to assume they have to do everything during an integration. This assumption doesn’t scale well when there are so many complexities to navigate. Relying on leaders at all levels to support their teams throughout an integration is a way for them to take an active role, but they must not be forgotten in the process. Finding ways to adequately prepare your leaders to coach their teams through the transformation will pay off in spades.
It’s About Building Connections Between People:
Shotwell believes that people from both legacy companies have ample opportunity to interact and to learn from each other. For example, implementing a buddy program to match up partners from both legacy organizations allows employees to both humanize members of the other company and increase understanding and appreciation for how each legacy organization was independently successful.
In today’s environment, you’d be hard pressed to find a senior business leader who has not lived through (some may say survived) a merger or acquisition in their careers. Why is it then, that we continue to try to convince ourselves that culture is not going to present a significant risk to our future transactions and their ability to drive the financial returns that we hope for?
This article originally appeared on Forbes.